Cell Phone Hi-Fi?

Music industry executives widely believe that "ring tones"—snippets of favorite tunes—and music downloadable to cell phones will be the next big trend, perhaps one that could help restore some luster to the industry's tarnished bottom line. "Music-related products for PCs and mobile phones are on pace to deliver as much as $500 million in combined revenue in the US for 2004, according to Nielsen SoundScan figures and analysts' projections," reported Brian Garrity in a mid-December issue of Billboard.

Buying into such received wisdom, Warner Music Group (WMG) has signed a global licensing deal with Melodeo, Inc. to make available tunes from WMG's deep catalog to approximately 20 million subscribers to Telefonica Moviles SA, Spain's top provider of mobile telephone services.

Also anticipating growing demand, on December 17, EMI Music Publishing signed an agreement with Sony BMG Music Entertainment that sets rates and protocol for the use of music in developing digital formats. Covering usage in North America, the deal includes the foundering DualDisc format, video downloads and distribution, and downloads for mobile telephones. It also leaves open the issue of unanticipated uses.

According to the WMG announcement, downloads will be "full track" (presumably a misnomer for "full bandwidth") rather than the skimpy low-rez versions that have been available to date—not that cell phones are in any way high-fidelity devices, or will be any time in the near future, despite engineering efforts to improve their sound. Clear sound isn't what cell phone service is about. The plethora of add-ons and marginally useful features—GPS capability, text messaging, photo uploads and downloads, video games, video-on-demand, web access, email, and now music download and playback—are intended to keep users on the phones longer and therefore boost billings for service providers, according to a telecommunications "sales engineer" we spoke with.

WMG is the first music company to sign with Melodeo, but not the last. The music industry's other big players—EMI, Universal Music Group, and Sony BMG—are also negotiating to license their catalogs for such use. "Music companies will see a bigger slice of revenue from the new type of downloads than they do from ring tones," notes a recent report in The Wall Street Journal. Spanish cell-phone users can expect to pay approximately €1.50 ($2.89) each for downloaded songs when the service begins next year.

To take full advantage of cell-phone audio, consumers will also need the latest phones equipped with larger-capacity memory chips, improved digital-to-analog converters (DACs), higher-resolution audio output chips, and, of course, headphone jacks. Such phones should hit the market in larger numbers by the end of next year.